Will Obama’s rule stem tide of dark money?

A new Obama administration proposal seeks to make it harder for tax-exempt groups like Karl Rove’s Crossroads GPS to pour money into elections. But the rule may do little to stem the flood of dark money into politics – and it could actually make life harder for groups that do the vital work of registering voters.

Under current rules, to qualify for tax-exempt status, groups must spend the majority of their funds on non-political work. Importantly for groups that raise and spend large amounts of money, tax-exempt status also allows them to keep their donors under wraps.

But there’s little consensus on how, exactly, “non-political” is defined. And many good government advocates argue that both liberal and conservative “dark money” groups take advantage of that ambiguity to participate in politics, while shielding their donors from scrutiny.

The new rule proposed by the Treasury Department and Internal Revenue Service Tuesday aims to clarify the process. It states explicitly, for instance, that running ads mentioning candidates near an election – as well as some get-out-the-vote work – would qualify as political actions.

The proposed rule, which is not final and must still go through a public comment period, is a response to the controversy over the IRS’s use of keywords to target political groups, an episode that was met with conservative furor and led to the departure of several top IRS officials. The saga offered evidence of numerous flaws in the process that the IRS uses to determine which groups should be awarded tax-exempt status. An internal report released in May recommended that the agency tighten its rules.

Progressive and good government groups cheered the proposed rule. “Too many social welfare organizations have exploited their status and operate primarily to elect or defeat candidates,” said Common Cause in a statement.

Meanwhile, some advocates of looser campaign finance laws worry that the rule could go too far in expanding what counts as political activity, by encompassing issue advocacy campaigns that happen to mention candodates in passing.

“I think if the IRS succeeds in narrowing the definition of social welfare so as to have a serious effect in this area, it’s gonna sweep a lot of activity within the definition of political activity that it probably will regret doing,” said Bobby Burchfield, a Washington lawyer who, in 2003, challenged the McCain-Feingold campaign finance law before the Supreme Court on behalf of the RNC.

But the rule’s impact could be limited. As written, it applies only to a certain type of tax-exempt group, so some organizations could simply change their status and continue more or less unaffected – and remain able to keep their donors secret.

“If the purpose of it is to make sure that tax-exempt organizations are primarily engaged in the tax-exempt purpose, not a political purpose, it should pick up all the organizations that might be used for political purposes,” said Richard Briffault, an expert on campaign finance law at Columbia Law School.

There’s another potential problem—one that could end up aiding the aggressive Republican effort to make voting more difficult. The rule defines all voter registration drives as political, even those conducted by nonpartisan groups. That could add to the burdens on organizations like the League of Women Voters and the NAACP, which run extensive campaigns to bring new voters—especially minorities and the poor—into the process.

Already, groups that register new voters have had to contend with onerous restrictions put in place by some states. In Florida, the number of new Democratic voters dropped by around 200,000 last year compared to 2004 and 2008, after the state enacted laws limiting the activity of voter registration groups.

Elisabeth MacNamara, the president of the League of Women Voters, said her group would be following the rule-making process closely.

“We will certainly be offering our opinions,” MacNamara said. “We’re going to be watching and making sure that we can continue to serve voters the way we have for the last 93 years.”